Extra Tools from Michael O's toolbox

Courtesy of Michael O:

Gold's breakout

Well, it's finally happened. Gold has broken its numerical historical high of $850/oz. Teeka wrote an article about it for the Tycoon Report called 'It's time to buy gold' that they just reused because its a good time to stress its points again. Be sure to check it out. Anyways, by the chart below you can see the symmetrical triangles I drew. The first taking six months and the latest taking only a few which broke its trendline resistance last week and now has broken it's price level resistance. By this pattern you can create a price target of about $940. I'm not investing in the metal, but I do have some positions in near-production, early production mining companies. They're just starting to create their revenues right now which should be reflected on their earnings reports throughout this year and onward. Just wanted to point the opportunity out.

When NOT to sell

Ok, so as I was saying, there's this chart that just makes me want to spit every time I look at it because I hit a GOLDEN opportunity and didn't know it. Sometime last spring when I was early on "experimenting" in the market, my greedy self started playing with momentum. I would check the gainers list every day to see what moved. One day, I saw a company named Timminco (symbol TIM) that had moved 100% in one day from $1 to $2, so I took a closer look and found that they had just signed a $50 million dollar contract over 3 years to supply Tire rims to a European company if I remember right. So I said to myself, "Self, this is a big deal. I think it's likely this isn't done moving yet. We should put in an order." So I did the next morning. When I checked at the end of the day, the stock was at $3 and I'd made 50%. Fearing (bad reason) losing my gain, I sold the very next morning. I'd check it every now and then to see what it was doing and so began my bitter experience of watching it continually break new highs. Dec 31st, 2007, Timminco closed at $21.95 (excuse me while groan). That could have been a 1000% gain. Experience would soon teach me that momentum was more often going to lose you money than make it. Looking back, I can only shake my head because I was so green. I had no idea what I was doing and basically I was speculating which was equivalent to gambling in my opinion. I followed NO indicators. I didn't know how to read charts or draw trend lines. I was pretty much looking at different terms and reading the news releases and guessing to its potential. I held on through support breaks, trendline violations, and tried to call bottoms (without indicators, how do you do that?) Now for the interesting part, the charts. Below you'll find a daily and then a weekly 1 year chart of Timminco.

I drew these charts with 10wk, 20wk, and 30wk MA's. I wanted to go back and take a look because I wanted to see what I didn't know then as well as get some clues as to help me not get shaken out of other strongly advancing stocks I may find. You can see the daily RSI is frequently above the overbought line, but for an advance like this it doesn't really matter because it's doing so much while its up there. This is such an obviously trending stock that it should have been, well, obvious not to exit. In the whole advance, it never touched the 30wk MA even once. All in all, I'd have to say I'm most impressed with the weekly MACD as it has only had one sell signal in November, but coupled with the MA's and RSI, it wasn't ever strong enough to warrant actually selling. I came across it on tv last month and apparently, a lot of their appeal is they're a supplier of solar-grade silicon which is in huge demand with the alternative energy movement coupled with the fact that there aren't a lot of suppliers. I googled and found a couple of companies that are preparing to produce solar-grade silicon in 2008, but they both trade on the Frankfurt exchange if I recall correctly. Anyways, I just wanted to share my story and if anyone has any tips about how to know when to stay in when sell signals are given, that would be great and beneficial to all. I do know that in a strong uptrend, the first MACD sell signal should be taken as a warning and not a definitive sell signal. Also, that during consolidation and flat trading, the RSI & MACD will both trend lower to the oscillator line, but should not be taken as weakness, just healthy consolidation. Any others?